Is Employee’s Training Bond Valid in Nigeria?
In the world of work, as the employers strive to improve the skills and competencies of their employees, they face great risk of potential loss of training costs and earnings when a trained employee decides to jump ship, sometimes shortly after an expensive training. So, the employers can rightly introduce training bonds to be executed by the employees before embarking on a paid training, which is to be sponsored by the employers. Training bonds are a measure against potential losses that could arise when the trained employees terminate their contracts after receiving training paid for by the employers.
For instance, in Overland Airways Limited v. Oladeji Afolayan & Anor [2015] 62 NLLR [Pt. 219] 525 at 605, the NICN held thus: “…a training bond seeks to compel a current employee whose training has been sponsored by the employer to work for an agreed duration so that the employer could derive the benefits of its investment on the employee. The case of A.G. FEDERATION V AWOJOODU (supra) relied upon is quite apposite on this point. Also, in line with the constitutional mandate of this Court to recognise and apply international best practices, I will like to state that the practice of executing training bond is practiced in different jurisdictions. see the cases of EDWARD MILES V. JETCENTRE LIMITED T/A THE PRIVATE JET COMPANY (supra) and NORHERN THUNDERBIRD AIR INC. V. VAN HAREN, (supra) cited by learned counsel for the Claimant are quite instructive. On the strength of the authorities that I have just referred to, I have come to the irresistible conclusion that Exhibits B & C are valid and enforceable as between the Claimant and the 1st Defendant.”
The general rule is that a party (i.e. an employee or employer) is estopped by his representations; and a person of full age and understanding is bound by the contents of any document to which he or she appends signature (including training bond), whether he reads or understands it or not. See Enemchukwu v. Okoye & Anor. [2016] LPELR-40027[CA] 16 and Fhomo Nigeria Limited v. Zenith Bank Plc [2016] LPELR-42233[CA] 44-45. In the latter case, Georgewill, J.C.A., observed that in law and in good conscience, persons, both human and artificial, are bound by the terms of contracts entered willingly by them and it is indeed the hallmark of honour to be so bound. No person who has not alleged and proved fraud or misrepresentation or illegality against due execution of a contract shall be allowed to resile from the terms of a contract duly and willingly entered by him. There are exceptions to this general rule. These include that the party signed the document (such as a bond) by fraud, duress, undue influence, misrepresentation or a plea of non est factum. In the absence of such exceptions, the contract is binding and any outstanding obligations under it must be fulfilled.
It is now beyond dispute that training bonds are recognised by law and enforceable by the Nigerian courts as security in employment relations. The National Industrial Court of Nigeria (“NICN”) has acknowledged, in several decisions, the right of an employer to use a training bond to recoup the fair costs of a training, sponsored by the employer to improve an employee’s professional and technical competence whilst in the employment of the employer.
How does the Court Determine the Enforceability of a Training Bond in Nigeria?
The ability to define or argue that a bond is a contract with fair and reasonable terms will largely determine its enforceability or unenforceability. An employee’s training bond is a contract between an employer and an employee whereby the former undertakes to pay a stipulated cost for the training of the latter with the understanding that the latter will either remain in employment for a specified minimum period or refund all or part of the cost of the training upon resignation.
In Overland Airways Limited v. Oladeji Afolayan & Anor the NICN held thus: “…a training bond seeks to compel a current employee whose training has been sponsored by the employer to work for an agreed duration so that the employer could derive the benefits of its investment on the employee…” The bond is a measure that prevents an employee from cheating an employer by resigning after acquiring new skills or certifications financed by their employer.
A bond is a mutually beneficial contract to both an employee and his employer. So, a training bond should not be viewed as a penalty or restraint of trade unless it is grossly unfair otherwise it will render the bond (freely entered) unenforceable. For instance, in Suit No. NICN/LA/141/2011- Overland Airways Limited v. Captain Joseph Gamra (unreported) judgment delivered on 7th January 2016, the NICN court (per Kanyip, President) held that: “What distinguishes a bond from a penalty is that in a penalty, the amount fixed for breach of contract is fixed as punishment and not as pre-estimate of the damages resultant from the breach. Thus, if the agreed sum to be paid on breach is a good pre-estimate of the damages to be suffered, then, the bond is enforceable but if not, it becomes a penalty and therefore unenforceable. Then, it follows that bond for breach of contracts are enforceable contingent on whether or not they are penalties or not.”
A contract in restraint of trade is any agreement which limits or restricts the professional activities of an individual or company. Under Nigerian law, a restraint of trade is generally void and unenforceable being against public policy unless it can be shown to be reasonable. However, a training bond is generally valid and enforceable unless it can be shown to be unreasonable. Reasonability is determined by taking into account the cost of the training, the bonding period, the restrictiveness of the covenant and the amount required to be paid by the employee in the event of breach. See Koumoulis v. Leventis Motors Limited [1973] LPELR-1710 (SC) 13.
The NICN has made conflicting decisions on whether a training bond contract qualifies as a restraint of trade. For instance, in Overland Airways Limited v Oladeji Afolayan & Anor ( judgment delivered by Justice B. A. Adejumo on 7th January, 2016) and in suit no. NICN/LA/141/2011, the NICN rejected the defendants’ arguments that the training bonds in question were contracts in restraint of trade when the the court held thus: “The objective of a contract in restraint of trade is to protect an employer’s confidential information acquired by an ex-employee from being used against the employer. On the other hand, a training bond seeks to compel a current employee whose training has been sponsored by the employer to work for an agreed duration so that the employer could derive the benefits of its investment on the employee.”
However, in Overland Airways Limited v Captain Raymond Jam, the same issue arose as to whether a training bond qualifies as a contract in restraint of trade, in which case the training bond will be prima facie unenforceable unless it is shown to be reasonable. The NICN took the view that a training bond is a contract in restraint of trade. According to the Court, the training bonds in question were “not enforceable between the parties being in restraint of trade unless they are shown to be reasonable.”
It is important to note that the court will more likely enforce a bond rather than nullify it unless it can be shown that the bond is grossly unfair, unreasonable and offends public policy and good conscience.
What is the Test for Determining a Reasonable Bonding Time of Employee and Compensation to an Employer?
In the case of Suit No. NICN/AK/49/2015 Dr. Victor F. Balogun & 2 Ors. v. Federal University of Technology Akure & Anor (judgment delivered on the 15th November, 2018) the NICN held that training bonds may be enforceable if the terms are fair and reasonable. The Court further gave an insight into the guiding principles of determining the enforceability of a training bond when it held that “A training bond is a contract and the court will consider the general principles of contract: i.e., is it fair and reasonable? Is there evidence of duress? Is there evidence of fraudulent misrepresentation? Is it common industry practice? Will the enforcement of the contract violate public policy? etc.”
Please note that there is no fixed test or precedent to what is a reasonable bonding time. So, the primacy of facts of each case must weigh on the minds of the legal practitioners, their clients and the judges who determine what is a reasonable bonding time of the employee and the amount recoverable by the employer as compensation vis-a-vis the investment made by the employer in training an employee and the length of service of the employee after the training.
As rightly observed by the Court in Balogun & Ors v Federal University of Technology, Akure & Anor (supra), “the reasonableness or otherwise of a training bond is dependent on the period of work required after training and the sum to be paid by the employee in the event of breach of contract.” The parties are obligated to present all the facts and prove their cases by leading cogent evidence in sport of their factual allegations. See Section 133[1] of the Evidence Act, 2011 and Koumoulis v. Leventis Motors Limited [supra].
For instance, some of the factors that may be relevant to prove reasonability are as follows: the nature of training, the duration of the training bond or bonding time, the amount required to be paid to the employer in the event of resignation, the time of execution of the training bond (whether before or after the training), the amount invested by the employer in the employee’s training, etc. In ATB Techsoft Solutions Limited v Ake (judgment delivered on the 16th March, 2021) in suit no. NICN/LA/100/2020, the bond was void as unreasonable and found that there was no evidence to prove the investment made in the defendant to justify the restriction. The Court equally impugned the bond on the grounds that it was made to ensure the stability of the employer’s business rather than to protect the investment made in the defendant.
In Overland Airways Limited v. Engr. Shehu Sekula & Ors. the Court held that: “It has been suggested that a bonding period of between ONE year to THREE years is reasonable, while a bonding period of five years is ‘outrightly unreasonable’. See Overland Airways Limited v. Jam [supra] at 606. As observed in Balogun & Ors. v. Federal University of Technology, Akure & Anor., Suit no. NICN/AK/49/2015, which judgment was delivered on 15th November 2018, reasonability or otherwise of a training bond is relative, and dependent on primacy of facts of each case. A bonding period of FIVE years may be justified by the investment made by the employer in developing the employee. The burden of proof in each case is on the employer who seeks to enforce the bond.”
The Nigeria court will not suffer an employer to be without compensation for his investment which an employee has utilized for the latter’s training. Even where the court finds that the bonding time is unreasonable, the employer will not be completely deprived of compensation.
In Overland Airways Limited v. Engr. Shehu Sekula & Ors. the Honourable Justice I. G. Nweneka of the NICN held as follows: “I am aware that some legal writers have posited that even if unreasonable clauses are stipulated in the contract such as imposing exorbitant duration of compulsory employment period or huge penalty, the Court could award compensation if it determines that the employer has incurred loss by such breach of contract. See Overland Airways Limited v. Jam [supra] at 606. The 1st Defendant acknowledged that he attended the two type rating training programmes paid for by the Claimant, even though he contends that it is not relevant to his course of study as Avionics engineer. There is evidence that the B1900 and PT6D type rating training is the legal additional aircraft type rating qualification recognized by the Nigerian Civil Aviation Authority which gives the 1st Defendant the professional and technical competence to practice as an Aircraft Engineer and the benefits derived from the trainings inure for a lifetime, and that it was this qualification that attracted the 2nd and 3rd Defendants. This Court cannot gloss over this evidence.”
In the Overland Airways Limited v. Jam [2015] 62 NLLR [Pt. 219] 525 at 609-610, Kanyip, J., posited: “Courts are enjoined, in making an award for compensation in the event of breach of an employment bond, to consider the circumstances of the case given that the employer might incur a loss and, therefore, may be entitled for compensation. However, Courts must note that the compensation awarded should be reasonable to compensate the loss incurred and should not exceed the penalty, if any, stipulated in the contract. The Court, of course, determines the reasonable compensation amount by computing the actual loss incurred by the employer having regard to all circumstances of the case; so that even if the bond stipulates payment of any penalty amount in the event of breach, it does not mean that the employer shall be entitled to receive the stipulated amount in full as compensation on the occurrence of such default. Rather the employer shall be entitled only for reasonable compensation as determined by the Court.”
What is the Effect of Termination or Resignation of Employment on a Training Bond?
It should be noted that an employer who terminates or breaches an employment contract during the course of an unexpired bond may be disallowed to sue to enforce the bond. The mere fact of a subsisting bond does not give the employer latitude to oppress the employee or treat him unfairly. In Overland Airways Limited v Oladeji Afolayan & Anor (supra), the Court held that “the termination of employment discharges the employee from every obligation in the training bond.” In this case, the Court held that the employer had terminated the first defendant’s employment when the employer refused to pay his salary, thus absolving the defendant of every obligation in the training bond.
However, it should be noted that where termination is a result of the employee’s wilful or gross misconduct, an employer should be entitled to sue to recover the cost of training. It will be an injustice for an employee to be excused from his contractual obligations by putting up bad conduct just to instigate a dismissal.
It has been argued in several cases that though an employee has the right to resign; such right is subject to the fulfilment of any outstanding obligations under their employment contract. This argument implies that the employee has a conditional right to resign that can be challenged by an aggrieved employer where the employee resigns in breach of his employment contract or is yet to satisfy some debts or other obligations resulting from training bonds.
In Bakare v Lagos State University (judgment delivered on the 29th of September, 2020 by Justice I. J. Essien), the NICN adopted the above submission when it rejected the claimant’s attempt to resign from the defendant’s employment and held as follows: “The claimant gave notice of her resignation on the 25th February 2016 to take effect from the 1st of March 2016.This is 4 days’ notice. The notice to terminate the employment between the parties was clearly in violation of the condition of service that regulate[s] the employment between the parties. It was therefore right for the defendant to have rejected the resignation of the claimant.”
Please note that, under Nigerian law, the resignation of an employee is effective immediately, notwithstanding the defects in the notice or failure to fulfil any outstanding obligations to the employer. The case of Dr. Ebele Felix v. Nigerian Institute of Management (NICN/LA/321/2014) delivered 4th July 2017 by Justice B. B. Kanyip PhD (now President) of the National Industrial Court is of utmost importance here. In that case, my lord Justice Kanyip held as follows:
“Resignation with immediate effect by an employee carries with [it] three legal effects: the right to leave service automatically; the employee’s forfeiture of any benefit; and the employee paying any indebtedness to his employer. The justification for having to allow the resigning employee to leave immediately and automatically is the fact that [he/she] thereby forfeits [any] benefit he/she may be entitled to as well as the duty to pay off all indebtedness that [he/she] may [have] towards the employer; as such, the forfeiture of benefits inures as contractual consideration for the immediate and automatic separation of contractual relationship as per the employment in issue. So it cannot be that an employee who resigns with immediate effect is allowed to also benefit from such immediate separation by claiming benefits from the employer.”
Also, in the case of W.A.E.C. v. Oshionebo (2006) 12 NWLR (Pt. 994) 258 CA (per Aderemi, J.C.A.), the Court of Appeal held that “a notice of resignation is effective not from the date of the letter, or from the date of any purported acceptance, but from the date on which the letter was received by the employer or his agent. Tendering of a letter of resignation carries with it the right to leave the service automatically without any benefit subject to his paying of any of his indebtedness to his employer.”
As earlier mentioned, the Nigeria court will not suffer an employer to be without compensation for his investment which an employee has utilized for the latter’s training. Even where the court cannot force an unwilling employee on a willing employer, the employer will not be completely deprived of compensation.
It is apposite to repeat the statements of law in Overland Airways Limited v. Engr. Shehu Sekula & Ors, where the Honourable Justice I. G. Nweneka of the NICN held as follows: “I am aware that some legal writers have posited that even if unreasonable clauses are stipulated in the contract such as imposing exorbitant duration of compulsory employment period or huge penalty, the Court could award compensation if it determines that the employer has incurred loss by such breach of contract. See Overland Airways Limited v. Jam [supra] at 606. The 1st Defendant acknowledged that he attended the two type rating training programmes paid for by the Claimant, even though he contends that it is not relevant to his course of study as Avionics engineer. There is evidence that the B1900 and PT6D type rating training is the legal additional aircraft type rating qualification recognized by the Nigerian Civil Aviation Authority which gives the 1st Defendant the professional and technical competence to practice as an Aircraft Engineer and the benefits derived from the trainings inure for a lifetime, and that it was this qualification that attracted the 2nd and 3rd Defendants. This Court cannot gloss over this evidence.”
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